Renfrewshire, Scotland, Jun. 2--Directors at Stoddard International, the troubled Scottish carpet maker, continue to breach corporate governance best practice to protect themselves against a takeover, but took home on average 8% less pay last year than the previous year.
The company's annual report reveals the directors are "entitled to a severance payment of 24 months' gross basic salary" if Stoddard were acquired--thereby flouting corporate governance guidelines.
The report said the remuneration committee believed it was "critical to retain the services of the executive directors and that their interests should be protected in the event of a takeover".
Total pay-outs for the seven-member board of the firm, which has consolidated production from three factories to a single site in Kilmarnock, employing a slimmed-down staff of 503, fell to £384,000 from £414,000 last time.
Meanwhile, annual losses at the group mushroomed to £6.2m and sales continued to plummet. In spite of what Alan Lawson, chief executive, has described as "two years of difficult trading", the company's three executive directors during 2003 received a total pay-out--including salaries and benefits--of £324,000, compared with £361,000 the previous year.
However, the annual report shows the executives did not receive any annual bonuses last year and were not given any increases in basic salaries.
Lawson took home £147,000, against £159,000 last time, which had in 2002 included a £12,000 performance bonus.
Michael Stewart, the former finance director who quit earlier this year to join heavy machinery firm Terex Equipment, was awarded £90,000 in salary and benefits, compared with his bonus enhanced package last time of £102,000.
Stoddard appointed Aileen Brown, a former consultant with Ernst & Young, as finance director and company secretary last month.
Graeme Caulfield, operations director, also had to forego his performance bonus and took home £87,000 in basic pay and benefits, compared with £100,000 the previous year.
The company attributed the rise in losses mainly to an £800,000 reduction in operating profit margins and a £2.3m increase in the pension charge.
The group's final salary pension scheme is also heavily in the red, with the annual report revealing a £13.6m deficit under FRS17.
The company, which last year closed its weaving factory and headquarters at Elderslie after 140 years, said its debt would be reduced significantly from the disposal of properties this year.
During a recent interview, Lawson declined to hazard a guess on when Stoddard might become profitable.
